As we reported in a previous blog post that can be found here, the Stronger Workplaces for a Stronger Economy Act, 2014 makes some significant changes to several Ontario statutes. The legislationreceived Royal Assent on November 20, 2014 and a copy can be found here, but the significant changes include the following:

1. Starting on October 1, 2015, it provides for increases (but not decreases) to the minimum wage under the Employment Standards Act, 2000 (the “ESA”) based on the Ontario Consumer Price Index. The CPI will be announced by April of each year, with the minimum wage change to come into effect on October 1. This will likely result in the minimum wage changing incrementally every year, creating an additional administrative burden on employers who pay their employees at or near the minimum wage.

2. It eliminates the $10,000 cap on the recovery of unpaid wages through Ministry of Labour Orders to Pay under the ESA. This provision comes into force on February 20, 2015, although the cap still applies to orders made in respect of wages due prior to the date on which the provision comes into force.

3. It requires employers to provide each of their employees with a copy of the most recent poster published by the Ministry of Labour that provides information about the ESA. An employer must provide available translations of the poster if requested by an employee. The poster must be provided to all employees within 30 days of the day on which the provision comes into force, and thereafter (for new employees) within 30 days of the day on which an individual becomes an employee of the employer. This provision comes into force on May 20, 2015.

4. It increases the period of recovery of unpaid wages (i.e. the limitation period) under the ESA to two years, and gives Ministry of Labour inspectors the ability to order an employer to conduct a “self-audit”, whereby it examines its own records to ensure it is in compliance, after which the employer must report back to the officer on the level of compliance. This provision comes into force on February 20, 2015.

5. It expands employment protections to cover all foreign employees who come to Ontario under an immigration or foreign temporary employee program (previously the protections had only been in place for live-in caregivers). This provision comes into force on November 20, 2015.

6. It creates “joint liability” for a temporary help agency and its client for certain ESA violations, such as the failure to pay regular wages, overtime pay, and public holiday entitlements. Although the temporary help agency still has the primary liability, the client is now jointly liable. This provision comes into force on November 20, 2015.

7. It amends the Workplace Safety and Insurance Act to add “temporary help agencies” as a recognized definition, and to assign workplace injury and accident costs to the client of a temporary help agency when an employee is injured while performing work for the agency’s client. This provision will come into force on a future date to be proclaimed by the Lieutenant Governor, so it is unclear when it will take effect.

8. It expands coverage under the Occupational Health and Safety Act to include unpaid co-op students and other unpaid learners, which will give them protections such as the right to know about workplace hazards and the right to refuse unsafe work. This provision came into force on November 20, 2014.

9. It amends the Labour Relations Act, 1995 in respect of the unionized construction industry’s “open period”, to decrease the time when construction workers can change their union representation (or apply to remove their union) from three months before the expiry of the current collective agreement down to two months. This provision comes into force on May 20, 2015.

Particularly in respect of the changes to the ESA, these expanded powers will likely result in an increase in claims made to the Ministry of Labour, as this process is generally cheaper and faster than court-based civil litigation.

In the Ontario Divisional Court decision of Simpson v Global Warranty[1], the issue was the application of a specific termination clause in an employment contract where the employer violated the contract in the course of the termination.

The employer had laid the employee off, and had only paid out his termination entitlements several months later, when the layoff became permanent. When the employee sued for additional amounts, the employer alleged just cause.

At trial, the Ontario Superior Court of Justice had determined that the employee had been constructively dismissed when he was laid off, and that the employee had not been terminated for just cause. On appeal, neither of these conclusions was in dispute. The only issue on appeal was the quantum of severance, and in particular whether the employer could rely on the termination provision in light of its alleged breaches of the contract, such that the employee was entitled to a longer common law reasonable notice period.

The employee argued that a termination provision in an employment agreement should not apply where (1) the employee had been constructively dismissed; or (2) the employer had unsuccessfully alleged just cause for dismissal. The employee argued that in both cases, the employer had breached the contract, and therefore could not claim the benefit of the termination clause.

The relevant clause of the employee’s contract stated:

[U]nless an employee is terminated for cause, an employee’s employment may be terminated at the sole discretion of the Employer and for any reason whatsoever upon providing the employee with one (1) weeks [sic] notice or pay in lieu thereof, subject to any additional notice, pay in lieu thereof or severance that may be required to meet the minimum requirements of the Employment Standards Act…

As the employer had refused to accept that the employee’s employment had been terminated when he had been laid off and consequently delayed payment, the employee was delayed in (a) receiving severance; and (b) his efforts to secure future employment (because he believed he might be recalled).

The Divisional Court found that the fact that the employer was in breach of the contract by not immediately paying the amount owed was not a breach “of an order of magnitude…as to disentitle the [employer] from the benefit of the termination provision”.[2]

The employee also argued that because the employer labelled the termination as a “lay off”, the employer could not rely on the clause, which only referenced “termination”. This argument was rejected because the clause addressed the events that transpired: termination without cause, which included constructive dismissal.

In dealing with the argument that the allegation of cause rendered the employer unable to rely on the termination provision, the Divisional Court distinguished the facts before it from those cases where an employer knowingly wrongfully terminates a contract for cause, which would repudiate the contract. In Simpson the Divisional Court acknowledged that the termination was initially effected not for cause and the termination amounts were paid out; consequently there was no repudiation. As such, the failed defence simply resulted in a finding that the employee was terminated without cause, the situation directly addressed in the termination clause.

This case identifies several potential pitfalls when it comes to the application of employment contracts, and in particular highlights the need for employers to carefully and correctly apply termination provisions at the time of termination. While the employer here was ultimately successful, the case is a useful reminder of just how important it is to cross the “t’s” and dot the “i’s” when proceeding with a termination, to avoid disputes that could lead to costly litigation.

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